The U.S. consumer watchdog agency, enmeshed in partisan politics since its creation after the 2008 financial crisis, is now at the center of a tug-of-war over who will lead it. Both the departing director — an Obama appointee often criticized as being too aggressive by banks and Congressional Republicans — and the White House have named interim leaders of the Consumer Financial Protection Bureau.
What the CFPB is
The CFPB was proposed by now-Sen. Elizabeth Warren, D-Massachusetts, in her previous job at Harvard Law School, and it was created as part of the laws passed following the 2008 financial crisis and subsequent recession. It was given a broad mandate to be a watchdog for consumers when they deal with banks and credit card, student loan and mortgage companies, as well as debt collectors and payday lenders.
The idea was to prevent financial companies, such as mortgage servicers, from exploiting consumers. Critics had said those kinds of companies had been subject to weak oversight before the financial crisis.
The CFPB gets its funding from the Federal Reserve and its director is given significant leverage to go after what he or she considers important. The director can be removed only “for cause,” such as neglect of duty, and not over political differences. The structure of the agency has long been a sticking point because of arguments that it gives too much power to a single agency director and limits the president’s ability to replace that person.
What it does
Under the leadership of its first director Richard Cordray, the CFPB implemented or proposed a myriad of new rules and regulations for the banking industry. Nearly every American who deals with banks or a credit card company or has a mortgage has been affected by rules the agency put in place.
The agency has also taken legal action against banks, mortgage companies, credit card issuers, payday lenders, debt collectors and others, and extracted billions of dollars in settlements. When Wells Fargo was found to have opened millions of phony accounts for its customers, the CFPB fined the bank $100 million, the agency’s largest penalty to date.
The banking industry has viewed CFPB as a thorn in its side, and accused it of overreaching in its regulation of consumer financial activities. Cordray lost some notable battles, such as when the GOP-led Congress overturned a regulation that would have ensured that customers could band together to sue their banks in a class action.
The leadership fight
Facing Republican opposition, President Barack Obama had used a congressional recess appointment to install Cordray to lead the agency. When President Donald Trump was elected, Cordray became one of the highest-level political appointees to remain, and some Congressional Republicans had urged Trump to fire him.
Cordray announced earlier this month that he planned to resign his office by the end of November. Many thought his early resignation would give Trump a chance to appoint his own director, who could remake the agency and potentially roll back the protections Cordray and his staff put into place.
But in tendering his resignation effective Friday, Cordray simultaneously elevated Leandra English, who was the agency’s chief of staff, into the deputy director position. With Cordray’s resignation, English would become acting director. That set up a fight with the Trump White House, which later Friday named Mick Mulvaney, currently director of the Office of Management and Budget, as interim director.
Cordray and the White House have cited different laws to support their positions. Administration officials on Saturday acknowledged that some other laws appear to clash with the one they cited, said that in this case the president’s authority takes precedence.
